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Private Equity Vs. Crypto Startups: Which Has a Higher Risk?

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ICO investing has been quite the rage—it’s volatile nature birthed a few “Bitcoin millionaires,” prompting widespread media hype and a stampede of hopeful investors. But what several hype investors later learned the hard way, is the fact that while one can gain enormous profits in as quick as a few hours, investors can lose just as much money, just as fast.

While traditional investing has been historically more stable and has not experienced the same magnitude of stock value spikes and plunges as cryptocurrencies have, some still crave the instant-millionaire possibility—despite its high-risk, high-return potential being a low probability. Perhaps some even crave the adrenaline rush that comes with crypto-trading’s heart attack-inducing fluctuations.

Traditional investment products like private equity, although more stable, are illiquid with overall investment time frames of between five and ten years.  During this period, investor capital is locked up and investors must wait until the fund is wound down to capture the full economic benefit of their investment.  Furthermore, private equity funds also have rigid time constraints around the harvest periods (the time frame during which investment must be sold to wind down the fund).  As a result, investment managers may be forced to sell assets in poor market conditions in order to wind down the fund, which may result in a loss for investors. Also, since the investment managers share in the profit of the investments after an IRR (internal rate of return) hurdle is achieved, the fund structure often times incents investment managers to sell the best assets first, in order to hit the hurdle.  This may or may not be in the best interest of the investors. These are just some of the challenges with private equity structures.

So the question remains, should investors park their money on ICO’s or is private equity still the best bet? With Muirfield Investment Partners, there’s no need to choose one over the other. Muirfield is bridging the gap in technology to enable users to invest in traditional assets and private equity—specifically real estate assets, while leveraging the benefits of blockchain technology at the same time. Using MIF tokens, investors can own a share of a private equity fund that has been optimized to address the systemic issues referenced above and provide investors with a more liquid investment, i.e. MIF Tokens which may be traded.  Furthermore, the fund is backed by a portfolio of US based real estate assets which helps to provide a hedge against the high-risk ICO’s that many crypto investors chose to invest in. Having a more stable token helps crypto investors build a more stable and balanced portfolio.

Cryptocurrencies or private equity: neither one but both

There are several factors affecting both private equity and cryptocurrencies. But with private equity being an already established, tried-and-tested investment product, it does not face the same scrutiny and legislative rollercoaster that cryptocurrencies are still being subjected to these days.

Apart from government regulations and intervention, cryptocurrencies (with values largely dependent on speculation and perception with no real-world assets backing them) are easy to manipulate through media influence and pump-and-dump schemes disguised behind well-rehearsed PR stunts. Unforeseeable events like hacks, crimes and scams involving blockchains and cryptocurrencies, can easily knock them down, as well. Apart from these, there are necessary protocol updates and development that could brew up heated public online arguments between developers and token holders, further affecting perception as well as mainstream adoption. “Whales,” or big-time holders, can also affect these values simply by cashing out or trading to a different token. And because blockchain technology enables fast value and data transfer, sell-offs happen much faster than before, causing rapid, real-time fluctuations and making a token’s value unsteady.

As many have proven time and time again, portfolios should be diversified, favoring more stable, balanced, and reliable investments. Indeed, there is currently an unmet need for lower risk, less volatile investment—one that is stable like private equity, yet benefits from the same instant autonomy that cryptocurrencies have and is free from the time restrictions of traditional shares.

But how will investors make a solid decision between cryptocurrencies and private equity?

This is precisely the question that Muirfield will eliminate  Private equity real estate investment firm Muirfield is building a system that will bridge the gap between real world assets and cryptocurrencies, giving cryptocurrency enthusiasts the option to diversify their portfolio to include legally compliant securities. Through MIF tokens, investors can easily trade and switch between cryptocurrencies and traditional assets using the asset-backed tokens—investments within the lower end of the risk spectrum.

A Tokenized Asset Offering (TAO), MIF tokens are backed by a portfolio of real estate assets, unlike the usually speculation-driven cryptocurrencies in existence. This makes for a more stable, crash-resistant market that will always have real-world value and will not easily collapse in on itself, regardless of PR stunts and media noise.

“At Muirfield, we believe that Crypto investors should, like any other investor, diversify their holdings.  We recognize their desire to keep their capital deployed in the blockchain and crypto ecosystem, and we are excited to provide them with an investment opportunity with a different risk profile than the traditional ICO.”  – Thomas J. Zaccagnino

MIF Tokens: the future of investment

At the moment, a cryptocurrency investor would have to cash their holdings out if they want to move them to traditional assets, and vice versa. They also incur fees each time they do, making it impractical to switch between the two and discouraging them from even trying. This equates to a lot of missed opportunity to either maximize profit or minimize loss.  

Without cutting their funds off from the cryptocurrency trading vein, investors can exchange cryptocurrency for MIF Tokens and therefore can benefit from profits of the funds real estate investments in a liquid manner, allowing the investor to chose how long they want to participate in the economic benefit of the real estate portfolio. Blockchain technology is a far more superior vessel for private equity, clearing the obstructions of traditional equity investing and providing an instant, global scale crowdsourcing platform. Muirfield believes blockchain technology is the future infrastructure even for traditional investments, and is thus, securing its place in pioneering the transition towards a more efficient, significantly more powerful and potentially more profitable investment highway—where traditional assets meet crypto assets. With Muirfield, there’s no need to choose one over the other.